Inheritance Tax  

IHT receipts up £0.5bn on last year

IHT receipts up £0.5bn on last year

The government collected £2bn in inheritance tax receipts for April to July 2021, an increase of £0.5bn than the same period a year earlier.  

In data published today (August 20), HM Revenue & Customs revealed receipts in July 2021 alone were around £575m - which is one of the highest monthly amounts in recent years, matched only by October 2020.

HMRC has suggested higher receipts in October 2020, November 2020, and March to July 2021 might be due to higher volumes of wealth transfers which took place during the Covid-19 pandemic.

But it has said this could not be verified until more data becomes available.

IHT receipts are predicted to continue rising after the chancellor's decision earlier this year to freeze the nil rate band until 2026.

Julia Rosenbloom, tax partner at Smith & Williamson said the recent run of increases to monthly IHT receipts means the tax is becoming an increasingly important revenue source for HM Treasury. 

She said: “One of the key drivers for the uplift will no doubt be the announcement in this year’s Spring Budget that both the nil rate and residence nil rate bands are to be frozen until at least April 2026, resulting in increased IHT bills for families as more estates are brought into scope on the back of soaring property and share prices.

“As the government continues to spend to help re-build the country following the pandemic, as well as the need to fund other areas such as social care, it will no doubt be casting its net far and wide to boost its coffers. 

“We still don’t know when the Chancellor will announce his next Budget, but whenever it takes place it is quite possible that personal taxes, including IHT and capital gains tax, could be in for a massive overhaul given the amount they raise for the Treasury on an annual basis”.

Rosenbloom added: “Increases to IHT charges could affect many and some may need to go as far as selling family homes to pay their IHT bills. Starting tax planning as soon as possible will mean that people can make the most of their current allowances before any new reforms are introduced."

The data published by HMRC also showed there were dramatically lower receipts at the beginning of the 2020-21 tax year, which was due to a temporary issue where it was unable to accept cheques due to Covid-19.

This was later resolved, resulting in a peak in June 2020 receipts. 

The data also revealed that receipts in April and May 2017 as well as March and April 2019 were particularly high to reflect announcements, subsequent delays and cancellations of rises to probate fees in February 2017 and November 2018.

HMRC said this may have caused executors to bring forward tax payments to avoid the prospective higher fees but stated it could not verify this until full administrative data becomes available.

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